What should I get as redundancy payment?
If you have had the misfortunate of being made redundant, this guide will help you to calculate how much redundancy pay you should receive.
What is redundancy pay?
Redundancy pay is compensation you receive from an employer and/or the government because your job has expired. There are two forms of redundancy pay:
- Statutory redundancy pay, which is the minimum redundancy payment laid down by law; and
- Contractual redundancy pay, which you may be eligible to receive if your employer has a redundancy scheme in operation at your place of work. Details of any scheme will be found in your employment contract.
As an employee, you cannot receive less contractual redundancy pay than the amount of statutory redundancy pay you are entitled to – this is the legal minimum. Therefore, if your employer’s contractual redundancy scheme gives you less redundancy pay than the statutory amount, your employer must still make up the excess to pay you at least the statutory amount.
Am I eligible to receive redundancy pay?
You may be entitled to redundancy payment if you have been dismissed for any one of the following reasons:
- Business closure
- Closure of your place of work
- A diminishing need for employees to do the work available.
- Statutory redundancy pay amount
The amount of statutory redundancy pay you can get will depend on a number of factors:
- How long you have worked for your employer
- Your age
- Your weekly pay.
If you are an employee with at least two years’ continuous employment, you will receive a statutory redundancy payment of:
- Half a week’s pay for each complete year of service when you were under 22 years old
- One week’s pay for each complete year of service while you were 22 years old or older, but under 41
- A week and a half’s pay for each complete year of service while you were 41 years old or older.
You can only count a maximum of 20 years’ service and the weekly pay is subject to an upper threshold – it is presently capped at £464 a week, increasing to £475 a week from 6 April 2015.
What is pay in lieu of notice?
When you are made redundant, your employer must give you at least one week’s notice for each completed year of service – up to a maximum of 12 weeks’ notice. Employment is calculated up to the date your notice runs out. If your employer has not given you any notice, it will be the date on which your notice would have run out if you had been given notice. Your employer may wish to pay you in lieu of notice, allowing you to leave your job earlier and still be paid in full.
Do I get holiday pay?
If you are owed holiday at the time you are made redundant, your employer must pay you for it or, alternatively, give you permission to take the holiday due before you leave.
Is my redundancy pay tax-free?
The first £30,000 of your redundancy pay is tax-free, plus you will not have to pay National Insurance contributions on it. However, pay in lieu of notice and holiday pay are taxable because they represent payment for work you have done rather than compensation for the job you have lost.